An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Yonca Ertimur
Stanford University

Stephen R Stubben
Stanford University

Abstract: We study the determinants of analysts’ decisions to issue revenue and cash flow forecasts. We conjecture and find that analysts’ decisions to issue revenue and cash flow forecasts depend on the market’s demand for and analysts’ willingness to supply this information. In particular, analysts tend to issue revenue and cash flow forecasts when earnings are less informative. Our results suggest that analysts supply revenue and cash flow forecasts when these forecasts help them differentiate themselves from competing analysts. However, the costs of producing and disclosing the forecasts also play a role in the decision. Specifically, we find that less experienced analysts from smaller brokerages are more likely to issue revenue forecasts. In contrast, analysts from smaller brokerages are less likely to issue cash flow forecasts, presumably due to the additional costs and effort associated with producing cash flow forecasts.

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